Safeguarding your real estate purchase against the possibility of title defects is important whether the home you buy is brand new or several decades old. Title defects discovered after closing could indicate that other parties have some ownership claim on your property, which may lead to legal costs or even result in the loss of your home. Title insurance is a type of policy that helps protect your rights to your property as the owner if title defects are identified any time after closing. Read to learn about the primary types of title insurance and how this indemnity policy might protect your real estate investment ¾and the place you call home.
Types of Title Insurance
Title insurance is purchased at the time of settlement. There are two main forms of title insurance, and they function independently to protect the interests of the two primary parties in a real estate sale: the lender and the homebuyer (owner).
- Lender’s insurance:A lender’s title insurance policy protects the mortgage lender against financial loss if the home loan becomes unenforceable or if the homebuyer should default on the mortgage at any point during the repayment period. The majority of mortgage lenders require homebuyers to purchase a lender’s policy at the time of closing.
- Owner’s insurance: An owner’s title insurance policy is optional for homebuyers and is highly recommended. This type of policy may be purchased in a standard or an enhanced form, and serves to provide financial reimbursement if another party attempts to stake an ownership claim to your property.
What Can Owner’s Title Insurance Protect Against?
Standard and enhanced title insurance policies vary in terms of the types of title defects against which they offer protection. Title defects discovered after closing can range from the more common, such as recording errors, judgments, and liens, to zoning violations and undiscovered heirs. Title insurance policies can help cover the costs of correcting title errors and legal fees (should you have to defend your ownership rights in a court of law), and remunerate for financial loss in the event you lose the property to another party.
Consulting with an experienced title agent can help you understand the differences between standard and enhanced title insurance policies so that you can choose the option best suited to your needs. For more on the benefits of title insurance, please contact Linear Title & Escrow today.